Managers to buy loss-making QXL

QXL Ricardo, the internet auction site, ended its extraordinary five-year run on the London Stock Exchange with a recommended offer worth £12m, compared with its value of £2.5bn at the height of the dotcom boom.

The deal is a management buy-out led by the chief executive, Mark Zaleski, and the finance director, Robert Dighero. At 700p, it is more than double the 320p price prevailing two weeks ago, immediately before the company said it was in takeover talks.

Mr Zaleski said he did not know why there was such a premium on the share price.

The funding is being provided by Great Hill Partners, a Boston-based private equity firm which invests in smaller companies.

The chairman, Jonathan Bulkeley, and his business associate Robert Montgomery are also backing the bid.

The management hold around 1.5% of the company, although their stake will increase if it is taken private.

Directors deemed as independent, including the former chief executive Jim Rose and Tom Power, recommended the bid to shareholders. However the share price only rose to 675.25p, well below the offer.

QXL has been loss-making since its inception in 1997 when Tim Jackson, a journalist, set up the business. At its last set of results, it had less than £1m left.

Mr Zaleski said QXL was not in desperate need of cash, but it would be easier to raise funds if the company came off the stock market. "We are a fledgling company that is trying to grow and in order to grow we need capital and that costs a lot," said Mr Zaleski.

QXL was valued at around £220m when it floated at the end of 1999 on the stock market as the internet bubble was just about to expand at an extraordinary rate.

In 2000 it bought Ricardo, a German rival, for more than £600m. It still has operations in France, Italy, the Netherlands and Belgium, although there is a dispute over the ownership of its Polish subsidiary.

Mr Zaleski said that there were no closures planned after the company is taken private, although the only profitable parts of the business are Scandinavia and Switzerland, where the company has a market-leading position. Elsewhere, eBay leads the pack.